At the time of the SARS epidemic in 2003, China accounted for 4% of the global GDP. China’s importance to the global economy has grown significantly since — by 2018, it accounted for 16% of the global GDP, as well as 10% of the world’s total imports and 13% of the total exports of intermediate goods. A dip in China’s GDP growth rate, therefore, will have spillover effects across the world.
The COVID-19 pandemic is likely to have a significant impact on China’s GDP, and its consequences for the rest of the world will certainly outstrip the SARS economic impact. The aftermath will reverberate down four main channels: reduced demand for imports, fewer Chinese tourists, supply chain disruptions due to shortages of Chinese exports of intermediate goods, and negative sentiment in financial markets spilling into real estate.
The drop in China’s GDP growth will be felt most acutely in European countries that rely on China as a source of final demand, and markets where China is highly integrated in the supply chain. As China-EU trade stands right now, any changes to how China exports to the European Union or how China imports from the EU will affect the European GDP growth rate. Germany, in particular, is heavily exposed to COVID supply chain disruptions owing to considerable Germany-China trade.
China has also grown significantly as a global outbound travel market over the last decade. The net drag on European GDP growth will therefore also depend on COVID travel restrictions and the return to tourism after COVID-19. The pandemic’s impact on the travel and tourism industry could also put a dent in real estate investments due to reduced influx from Asia-Pacific investors.
COVID’s impact on financial markets and the stock market volatility seen after COVID-19 will also sway the EU’s GDP growth in 2020. Fluctuations in the financial market will dictate COVID investment trends across the EMEA region, as well as influence the perceived attractiveness of its property market — there will likely be a marked change in the region’s real estate investment during the COVID pandemic.
COVID-19’s impact on the hospitality and retail sector, as well as the subsequent growth of e-commerce during the COVID pandemic, could also directly accentuate the strain on the European property market in 2020 and EMEA’s real estate market outlook as a whole by diminishing the need for traditional brick-and-mortar structures.
In this report, CBRE explores COVID 19’s impact on EMEA real estate in the near- and long-term, the region’s real estate outlook after COVID and to what extent its fate hinges on COVID’s impact on economic growth.
Click below to read the full report
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